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TRANSPORTATION AND
THE CANADIAN ECONOMY

Contribution of Transportation to the Economy

The relative importance of transportation to the economy can be looked at from two different perspectives - as commercial or for-hire transportation, or as transportation-related demand. Commercial transportation refers to those service industries that move passengers and goods for a fee, such as airlines, railways and trucking firms. Transportation demand, on the other hand, measures all the expenditures on goods and services that allow for the mobility of households, businesses and government. This section is organized according to these two perspectives.

Commercial Transportation

The importance of commercial transportation or transportation industries can be assessed through the value-added of the industries. Value-added can be seen primarily as payments made by industry to workers or shareholders. It is the commonly used economic measure for assessing the relative importance of industries to the economy, and is used as a measure of the supply of transportation.

In 2000, transportation industries accounted for 4.1 per cent of Gross Domestic Product (GDP). Trucking, at 1.7 per cent, made up the largest share of this, while the domestic marine industry, at 0.3 per cent, accounted for the smallest share.

Transportation industries continued to grow faster than the economy in 2000, as they have consistently over the last five years. This growth was dominated by the freight industries - marine (10 per cent), rail (seven per cent) and trucking (6.8 per cent). The air passenger transport industry growth was slow in 2000, while passenger transit industries grew by four per cent, slightly more than the GDP. Table 2-3 breaks down the commercial transportation as a percentage of GDP.

Transport Demand

As mentioned earlier, transportation demand refers to all expenditures on goods and services related to the transportation needs of households, private business and government. In contrast to transportation industries, it is measured using a different method for calculating GDP - the final demand for all goods and services in the economy. Final demand is the sum of personal expenditures, investment, government spending and the trade balance (exports minus imports).

As Table 2-4 shows, transportation demand represented a much larger share of the economy than transportation industries in 2000,Note 1 with transportation demand accounting for 12.8 per cent of GDP. Transportation demand consists primarily of expenditures on transportation equipment (e.g., cars and trucks) and associated infrastructure (e.g., roads). Transportation equipment is the leading expenditure item in the exports, imports, personal expenditures and business investment sectors. In the government sector, the vast majority of both investment and spending is on roads. Appendix 2-1 gives a more detailed breakdown of personal expenditures, while Chapter 3 of this annual report discusses government expenditures in more detail.

In contrast to transportation industries, transportation demand declined in 2000, decreasing by 0.6 per cent after a 4.5 per cent average annual growth over the last five years. This slowdown was largely due to reduced exports of transportation equipment, as well as reduced inventory accumulation of vehicles, due to the high level of inventory stock. Annual growth in fuel and lubricant purchases by consumers was also negative, reflecting higher fuel prices in 2000.

A slightly different measure of the importance of transportation demand is final domestic demand. This is a measure of expenditures by Canadians made up of personal expenditures, investment and government spending, but excluding foreign trade (exports and imports). This measure generates a somewhat lower estimate of the share of transportation demand - 11.8 per cent of final domestic demand in 2000 - as can also be seen in Table 2-4. This lower value is primarily the result of excluding the trade surplus generated by exports of transportation equipment. In 2000, annual growth in domestic transportation demand (2.5 per cent) was well below the growth in final domestic demand (5.2 per cent), again reflecting growth in inventories and the negative growth in purchases of transportation fuels.

TRANSPORTATION AND THE CANADIAN ECONOMY

The Canadian Economy

Contribution of Transportation to the Economy

Appendix 2-1 Personal Expenditures on Transportation, 1998

 

NOTE

1 It should be noted that transport demand will tend to underestimate the value of commercial transportation, as much of commercial freight transportation is an intermediate service whose cost becomes embedded in the price of other non-transport demand goods, i.e. shoes, groceries, etc.